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About 12 months ago I remember hearing from a number of domainers that the domain industry is essentially protected from the Global Financial Crisis. I really couldn’t understand that thinking as ultimately any PPC income is dependent upon Google and Yahoo and they in turn depend upon advertisers.
 The recent published financial results from Google have made very interesting reading. For the first time ever Google posted a down-turn in earnings which is remarkable for a number of reasons. The first is that it’s incredible that in a traditionally volatile industry like advertising that Google has not posted any down-turn in earnings until now. The second is that the down-turn was 3.1% for the Google owned properties and 3.2% for the content network – which is very low compared to what some other industry verticals have experienced in the last 12 months.
Although these numbers are low it should be considered that they represent an aggregate of the entire Google content channel of which domaining is one part. As seen from a slide that I produced which graphed the Google share price and Earnings per Click rate the domain industry has experienced a considerable real decline compared to other publishers. Click here to view this article.
Another interesting fact gleaned from Google’s financial results is that Google has halted the decline in what it pays out to content providers. Quarter 4 ’08 and quarter 1 ’09 were both at 26.9% which suggests that we may be seeing a bottoming out of what is paid out to the content channel. Remember that the domain channel is a part of the overall content channel and that a reduction in Traffic Acquisition Costs (TAC) is a bad thing for the domain industry.
I was not able to get the same granular information from Yahoo’s various reports and after a considerable amount of reading of annual reports I found that Yahoo’s TAC has decline from a high of 30% in 2005 and now sits at 25.1% for 2008. For a similar period Google has decline from 37.2% down to the already mentioned 26.9%.
A challenge for both Yahoo and Google is that if they continue to reduce what they pay their publishers then there will come a point where publishers begin migrating to second tier PPC providers or affiliate networks. I wouldn’t be surprised if both Google and Yahoo are getting to that point now and hence the slowing down of the reduction in TAC.
I think that we have seen the lowest point in the PPC side of the industry and during the next 6 months an upward trend will become more evident as the global economy recovers. I would recommend keeping an eye on the Google and Yahoo share prices as an early indicator of better EPC rates to come.
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